Building Wealth Begins With This First Step

Posted on March 7th, by Janice in Uncategorized No Comments

3d illustration: World Tour. The group of buildings and suitcases

Most people dream about being wealthy or play the lottery in hopes of winning millions, but few people actually have a strategy to achieve their dreams of wealth.

I hear many reasons why someone doesn’t have a wealth strategy:

  • They don’t really know what a wealth strategy is.
  • They don’t know how to get started.
  • They think they need to wait to get started because they don’t have any money.
  • They think they need to get out of debt before starting their wealth strategy.

A wealth strategy is a plan of action intended to achieve specific wealth goals. The fact is, everyone needs a wealth strategy, regardless of goals, age, wealth, income or debt.

The First Step to Creating a Wealth Strategy
The first step to creating a successful wealth strategy is knowing where you are going. I call this Your Wealth Vision. Your wealth vision is your picture of your ultimate lifestyle. Where do you live? How do you spend your time? What are the possibilities? Now, we can all close our eyes for a few seconds and imagine the lifestyle of our dreams. But to truly define your wealth vision means being very detailed and specific.

For example, in just a few seconds time, we may imagine our ultimate lifestyle to include traveling. In those few seconds, we may imagine the excitement that goes with traveling, and a snapshot of a place we’d like to go, but the details probably aren’t more specific than that.

This is much different than someone who takes the time to specifically define how they see traveling in their wealth vision. For example,

  • How often will they travel?
  • Who will they travel with?
  • Where will they travel to?
  • How long will each trip be?
  • Will they fly coach or first class?
  • Will they stay at a hotel, rent a home or buy a home?
  • What activities will they do when they travel?

The more detailed and specific the wealth vision, the more likely it is to be reached.

Avoid This Mistake When Creating Your Wealth Strategy
Many people skip this first step. I think it’s because many people think that their wealth vision is simply to have lots and lots of money, so defining it is a waste of time. Plus, they are eager to move on to the next step. But, this first step is critical because you can’t get to where you’re going if you don’t know where it is you’re headed.

Once your wealth vision is defined, key pieces of your wealth strategy can come together. For example, when you know your wealth vision, you can determine your target cash flow and your target net worth. These targets can be used to develop investment criteria so your investments work toward your wealth vision and not against it.

Your Wealth Vision
Really think about your wealth vision and the specific details. Then, put it in writing. This is the first step I always take with any wealth strategy I create.

Don’t Understand Your Financial Reports? Here’s Why

Posted on March 1st, by Janice in Business Wealth No Comments

paperwork-1538658-639x426Have you ever been handed a balance sheet and income statement from your accountant and been told that this is your reporting? When you look at these reports from your accountant, do you scratch your head and wonder what you are suppose to do with these reports? Many business owners and investors get reports that they don’t understand – and it’s not their fault. Most reports are either too technical or are missing information to give the reader the insight they want.

Do you file these reports as quickly as possible, hoping to never see them again?

While reports like your balance sheet and income statement can be helpful, particularly when it comes to tax planning and preparing tax returns, they are not the most useful reports when it comes to providing you with information that will help you grow your business and wealth.

Do the reports you get in your wealth strategy make you cringe?

Now, be honest. Did you cringe at the mere mention of reporting? I’m sure some of you saw the word reporting and immediately began trying to convince yourself you don’t really need it. I find that most people avoid reporting, even though reporting can be a huge resource in their wealth strategy – one that allows them to leverage their time and other resources.

Why would someone avoid something that helps them accelerate their wealth?

There are several reasons I hear:

  • It’s too difficult to understand
  • It takes too much time
  • It’s boring
  • I don’t know how to set it up
  • I don’t really know what it means

If your reporting isn’t set up correctly or at all, the above are all true.

What is Reporting?

Reporting is summarizing activity in a clear and concise format. Most importantly, the information in the report makes sense to you. When done correctly, reporting is a valuable resource that helps you make timely business and investing decisions and saves you time while doing so. Reports provide tremendous leverage.

What Reporting Should Be

Reporting should report the activity YOU want. There are no specific rules that must be followed – it is based on facts, figures or data you want to help you make decisions to grow your business and your wealth.

It’s always amazing to me the number of people who think they don’t need reporting in their wealth strategy. Some think they will be so successful that they don’t need a report to tell them that. Others think that reporting is just for their accountant to do their taxes. And others think they aren’t big enough to need reporting.

Whether you have 1 employee or 100, whether you have 1 rental property or 50, whether you invest in options, tax liens, or oil & gas, you need reporting.

Deducting Business Travel When Mixed With Personal Travel

Posted on February 15th, by Janice in Business Taxes No Comments

3d illustration: World Tour. The group of buildings and suitcaseWith the new year here, many people are making plans to travel so it is a great time to do a refresher on the rules for deducting travel so you can legally write-off your vacation and personal travel.

While the tips I share here are specific to the U.S. tax law, the key is to understand the rules in your country and use them to your benefit in your tax strategy.

1. Spend the Time
Spend more than 50% of your time each day on business activities and you can deduct 100% of your travel expenses. Plan your business and other activities so you meet this requirement.

2. Expenses for Spouses and Children
Travel expenses for your spouse and your children are 100% deductible if your spouse and children are involved in your business and spend more than 50% of each day on business activities. Planning is the key here. Plan your business and other activities so your family meets this requirement.

3. Create a Business Reason
Create a great business reason to travel to your desired location. This is my favorite tip because I find when I create a great business reason to travel, my business benefits in a way that it wouldn’t have without the travel.

4. Keep Personal Travel Personal
If your travel is for personal reasons – treat it as personal. If one of your goals for a particular trip is to take a break from business, then treat that trip as personal. Trying to claim that as business travel could draw a lot of scrutiny to your legitimate travel expenses. Or, if your spouse and children don’t participate in the business, treat their portion of the travel expenses as personal – trying to deduct their expenses could jeopardize your portion that is legitimate.

5. Know the Rules Outside the U.S. 
Travel outside of the U.S. has a completely different set of rules. Be sure to discuss this with your tax advisor before you travel.

Use Your Travel in Your Tax Strategy
Travel is one of my favorite deductions because it is one of those expenses that most of us already have, and when planned properly, it gives us the opportunity to increase our business’ bottom line while decreasing our tax liability.

2 Obstacles When Forming a Tax Strategy

Posted on February 10th, by Janice in Taxes No Comments

chessThere are two big obstacles most people run into when forming a tax strategy.

1. Having No Strategy

A strategy is a systematic plan of action intended to accomplish a specific goal or purpose.  With a tax strategy, the specific goal or purpose is to permanently reduce your taxes.

Of course, most people are all for permanently reducing their taxes. What is typically missing in their quest to do that is the strategy piece. And it’s the strategy piece that produces the maximum results. The strategy piece helps focus our actions and thoughts every single day on permanently reducing taxes. It doesn’t have to take hours every day to get maximum results from your tax strategy. Instead, your strategy becomes a part of your daily routine. Every transaction can have an impact on your taxes. Your tax strategy helps you think about your daily transactions in a way that gets you to your goal of permanently reducing your taxes.

2. Getting Started 
Think about planning a vacation. Let’s say you are going to Hawaii. When you go to book your ticket, you need to know where you are departing from, right? This is your starting point. It is impossible for you to get to Hawaii unless you know where you are starting. The same applies to a tax strategy. You must know where you are starting. In your tax strategy, this means you must know your current financial position.

Current Financial Position
Your current financial position includes your current balance sheet. 
Your current balance sheet tells you your current net worth. It’s calculated as follows:
               Your Assets (what you own) – Your Liabilities (what you owe) = Your Net Worth

When you know your current net worth, you know the exact resources available to use in your tax strategy. Your specific assets and liabilities help create the best path for you in your tax strategy.

Your Current Statement of Cash Flows
Your current statement of cash flows tells you your net cash flow. It’s calculated as follows:
       Your Income – Your Expenses = Your Net Cash Flow

Identifying your sources of income is the starting point of identifying how to reduce the tax on that income. Identifying your expenses is the starting point of maximizing your deductions.

Get Started
The starting point to reducing your taxes and forming a tax strategy is understanding your current financial position. If you haven’t created your tax strategy yet, start by updating your balance sheet and statement of cash flows. If you already have your tax strategy in place, review your current financial position regularly to identify new opportunities for your tax strategy.

Your Tax Strategy and Your Wealth Strategy
If you are like most, the single biggest expense draining your cash flow is your taxes. When you reduce your taxes, you immediately increase your cash flow. Increased cash flow can be used to create wealth. Your taxes are a powerful way to feed your wealth strategy!


Did Your Business Name Get Terminated?

Posted on February 1st, by Janice in Business No Comments

hello-my-name-is-1244204-639x456Did you forget to renew your business registration? When your business began it had registered with the State of Michigan, probably a while back, however, the annual registration renewal was not done. After several years of non-renewal, along came your competitor who called to see if you would like to buy your business NAME back at a considerable cost. What a surprise! This created problems for your Business, because it could no longer do business under its original name in the State of Michigan. Your competitor registered its company with your NAME and now they had a legal right to use your NAME while doing business in Michigan.

Today we are discussing the topic of Michigan business registration renewal. Michigan businesses are required to renew their registration with the State of Michigan annually. Your renewal papers are mailed only once a year right around December or January. Unfortunately, after the initial mailing, there are no other reminders to renew your business registration. Filling out the paperwork isn’t a long process, but it is necessary if your business wants to continue operating under the same name in the future. Registration renewal fees are $20 and up and can be completed easily with our expertise. Michigan does offer a new online payment feature for those who like online payments.

Registration renewals are vital to your Company! If not completed for three consecutive years your business name can be taken by another business just like in the story above. This can occur with no warning from the State or from the requesting business. If a business realizes it hasn’t renewed for three or more years it can bring that renewal current, but there are penalties and fees in order to do so, assuming no other business has registered that name.

The process of renewal isn’t difficult, but it is important and a little bit of time needs to be spent to complete this important function. If you don’t feel comfortable filling out the paperwork, Vanderbilt CPA Group is happy to help you complete the process.

Janice S. Vanderbilt, Vanderbilt CPA Group

3 Ways to Use Leverage to Build Wealth

Posted on October 12th, by Janice in Business Wealth No Comments

NEW_DOCUMENTThink about how much time you spend earning your money. Now, think about how much time you spend investing that earned money. This is a challenge many people face.  Most people spend at least 40 hours per week – each and every week – earning their money and maybe an hour per month on investing that earned money. This allocation of time won’t get them to their goal of passive income any time soon.

A Wealth Strategy Doesn’t Have to be a Full-Time Job
A wealth strategy doesn’t have to be a full-time job if it is done properly.  This is why I say you must build a business around your wealth. A business is one of the best forms of leverage.  When wealth building is treated like a business, it is possible to see results in just a few hours each week.

What exactly does it mean to build a business around your wealth?
In any business, leverage comes in many forms, all of which contribute to spending less time “in” the business and more time “on” the business.  This is key in a wealth strategy – it’s what enables someone to be successful in their wealth strategy in just a few hours each week.

Here are 3 forms of leverage commonly found in a business that I think every wealth strategy should have:

Leverage #1: A Clearly Written Strategy
It’s common for a business to have a clear written strategy, but it’s not common for a person to have a clear written strategy for their investing.  Without a clear written strategy, a business (or wealth strategy) often changes directions many times, and with each change, time and money is lost.   

A clear written strategy helps reduce the amount of time a person spends in their wealth strategy because there is a clear focus.  The strategy can be shared with team members so they are more efficient and focus only on those things that support the strategy.

Leverage #2: Systems
Systems are the greatest form of leverage in a business.  The systems run the business.  This enables the owner to spend his or her time managing the systems instead of managing the people.  Managing systems is not only more efficient than managing people, it also takes less time and effort and produces greater profit. Systems should identify the who, what, where, why and how for operating a business.  Systems can (and should) touch every aspect of a wealth strategy.

For example, a wealth strategy should have systems for:

– Identifying and selecting investments.

– Funding the investments.  If there is a loan process, there is a system for that.

– Managing the investments.

– Reporting for the investments.

Creating the systems can take some time, but once they are in place, it becomes very efficient to run a wealth strategy.  The systems help reduce the amount of time required to manage a wealth strategy.  The systems also provide better information so decisions can be made proactively and not reactively – this is also a huge time and money saver.

Leverage #3: Team of Advisors
The 3 most expensive words in the English language are “do it yourself.” Having a team brings leverage and velocity to investing which leads to better and faster results.  This is what businesses do.  They build a team with their employees, vendors, customers, advisors, partners and so on. This same principle applies to a wealth strategy.  The right wealth team can bring the greatest value to a wealth strategy.

Using Business Leverage in Your Wealth Strategy
If you are an investor and don’t think of yourself as a business owner, think again.  Those who are most successful in their wealth strategies are those who have built a business around their wealth and treat their investing activities like a business.

The above are just 3 examples of how leverage commonly found in a business can be used in a wealth strategy.  Start taking the steps today to work towards building a business around your wealth.


3 Tips to Build Wealth Faster

Posted on October 6th, by Janice in Wealth No Comments

dollarMost people I speak with are anxious to speed up the process of building their wealth.  Here are 3 tips I’ve developed over the years that are effective at doing just that.

1: Treat your investing like a business
Successful investing is not a casual activity. When investing is treated like a real business, the level of success skyrockets. What does a business have that your investing should have?
Here are a few items:
– Vision statement, mission statement and values
– Systems that provide specific guidance on how things are done
– A team consisting of advisors, vendors, customers (tenants) and employees
– Agreements with your team members
– Reporting that allows you to make informed, proactive decisions

2: Focus
When my team and I first talk with someone about their wealth strategy, we usually find they are interested in many different types of investments. They may want to start a business, invest in real estate and do some stock trading. Our role is to help them narrow their options so they can focus on a single type of investment.

Some people become uncomfortable when I suggest focusing on a single type of investment. This may be because the only way they have been taught to reduce their risk is to have many types of investments. The idea behind this approach is that risk is reduced because the investments will go up and down at different times so overall there is “balance.”

While I’m all for reducing the downside, this approach also limits the upside. I would much rather limit my downside through education – focusing on a single investment type – and not limit my upside.

Or, they may be concerned it will limit their options and success. Focusing on a single investment type in no way means limiting the number of options. Within any type of investment, there are hundreds, if not thousands, of options.

By focusing, it becomes clearer which investments will work in a wealth strategy and that contributes to the success of the wealth strategy.

3: Leverage your tax savings
Tax savings can be worth more in a wealth strategy than just the actual amount of tax savings. If someone reduces their taxes by $20,000, then that’s $20,000 more that is available to invest in their wealth strategy.

That alone is good news, but it gets so much better! That $20,000 can be leveraged with other people’s money to buy an asset worth more than $20,000. Take real estate as an example. A $20,000 investment could buy a $100,000 property by getting an $80,000 mortgage.

Take it even one step further and invest in assets that generate even more tax savings and put those tax savings through the same system.

Start today. Identify one thing you can do today to power up your wealth strategy. It can be one very small thing. Then, build on that every day.

The Hidden Value in Your Tax Return

Posted on June 1st, by Janice in Taxes No Comments

TaxReturnTax returns are never given enough credit. Most people dread having to deal with them. And, they are often viewed as a commodity – by taxpayers and tax preparers alike. I see tax returns as a tremendous tool because this is what “seals the deal” on tax savings that have been identified as part of a tax strategy.  

For the average taxpayer, their tax return is something they focus on only once a year.   In order to leverage the benefits of a tax return, it needs to be a part of your everyday activities.  Here are just a few ways to integrate your tax return into your everyday activities.

Business and Investment Activities:

Remember that what you do in your business and investing always impacts your tax return
Think about the recent business or investment activities you’ve had.

  • Have you bought anything?
  • Have you received any money?
  • Have you entered any agreements?
  • Have you sold anything?

All of these activities are routine activities in business or investing, and every single one has an impact on your taxes – particularly how your tax return will be filed.  Make it a point to work with your tax advisor to gain a basic understanding of how these activities will be reported on your tax return.

Discuss your specific activities with your tax advisor to come up with a plan to ensure your activities work with your tax strategy to minimize your taxes. For example, if you learned, prior to having your tax return prepared, how to change your activities slightly that resulted in a better tax result, this would be valuable information to apply during the time you are engaging in the activities.

Keep Documentation Updated

Nothing good comes from scrambling to get tax return information together in order to file a tax return. When information is gathered in this manner, it is often incomplete and inaccurate. Once you understand how your activities impact your taxes and your tax return, you can then develop systems to keep the documentation you will need for your tax return. With this approach, you can leverage the benefits of your tax return into your everyday activities.

Keeping your documentation up to date is one of the most effective ways to monitor your tax strategy. It makes the tax preparation process much smoother and more accurate. Plus, you can easily review your documentation regularly to make sure your tax strategy is on track and if it’s not, you have time to make changes before it’s time to report it on your tax return.

Always Know Where You Stand

You’ve probably heard some tax preparation firms brag about how many of their customers receive refunds, or the average size of their customers’ refunds. Isn’t this great news? Well, I’m not sure. A refund can seem like great news, especially if it isn’t expected, but it usually indicates a lack of strategy.

With proper planning, that refund can be received a whole lot earlier. While most people don’t want to owe tax when they file their return, they also don’t like to part with their money any earlier than they have to and that is exactly what a refund reflects.

Where do you stand – are you going to owe with your tax return or are you going to get a refund?  This is important information to know throughout the year.

Never Underestimate the Value of a Tax Return

Your tax return is a huge part of the success of your tax strategy. It is the final step of making the tax savings a reality.

Investing in Rental Property Through Your IRA? Think Again!!

Posted on April 6th, by Janice in Taxes No Comments

rentNever ever put a tax shelter investment inside another tax shelter. 

What many people don’t realize is that this is exactly what they are doing when they invest in rental real estate through their retirement plan (like an IRA).

I’ll use the IRA – a popular retirement plan in the U.S. – as an example here, but the approach and concept can be applied to retirement plans in other countries as well.

An IRA is a tax shelter. Tax on the income is either deferred (Traditional IRA) or eliminated (Roth IRA).

Rental real estate is an example of a type of real estate investment that can be a tax shelter on its own. Rental real estate often generates losses for tax purposes even when there is positive cash flow. This is because of the depreciation deduction that can be taken on the investment.

When properly executed, rental losses can be used to offset other income which effectively shelters that other income from income tax. This can result in significant tax savings.

If an IRA has rental losses, the IRA is generally not paying tax so there is no tax to shelter.

If an individual has rental losses, there is an opportunity to shelter other income, including W-2 or business income, from income tax. This results in not paying tax on that other income and those tax savings mean cash in your pocket.

Run the Numbers
As with many wealth and tax questions, the answer can be found by running the numbers. Are there more tax benefits available to you if you invest in rental real estate inside or outside of your retirement plan? Run the numbers based on your long term wealth strategy.

In the analysis I’ve done with clients and for myself, the tax results are better when a tax shelter (rental real estate) is not put inside another tax shelter (a retirement plan). The tax benefits lost are too significant.

A Simple System for Documenting Travel Expenses

Posted on March 15th, by Janice in Business Taxes No Comments

3d illustration: World Tour. The group of buildings and suitcase
I love traveling for business. It’s a great (and legal) tax deduction and it takes me all over.

When it comes to business travel, documentation – particularly your receipts – is extremely important. Travel is one of those areas that is heavily scrutinized during an audit. Your best defense is a good offense. In this case, that means solid documentation.

What happens to many of us when we travel is we get home and find receipts in various places over the next several days (or even weeks). There are some in our wallets, others in our computer bags, more in our coat pockets, some in our cars and with all of these, there are still probably some missing.

This is why I developed a simple system for my documentation – there are two rules I follow.

Rule #1: Leverage the Convenience of Email
When my airfare is booked, the airline sends me an email automatically that has all the information I need for my receipt. I forward that email to my bookkeeper immediately upon receipt. That takes care of the airfare receipt.

When I check out from my hotel, I request to have a copy of my bill emailed to me. I forward that email to my bookkeeper immediately upon receipt. That takes care of my hotel receipt.

With my airfare and hotel receipt, I have the receipts for the majority of my actual expenses. But, most of the receipts from my travel come from the other expenses, like meals, cab fare and tips, many of which are often paid by cash. I tackle those with Rule #2.

Rule #2: Pack an Envelope
Part of my packing for a business trip includes packing an envelope in my carry-on bag. Any time I get a receipt, I write notes on it as to what it was for and then it goes in the envelope. After my trip, I give the envelope to my assistant who scans the receipts.

My assistant scans the receipts based on how I paid for the expense. If I paid with my business credit card, my assistant scans those receipts together and emails them to my bookkeeper. My bookkeeper then has everything needed to properly account for those expenses.

If I paid with cash, my assistant scans those receipts together for me and includes them in my monthly expense reimbursement report that I submit to my company at the end of each month.

Even though it’s my own company, I still submit an expense report.

This is a really important step because when my company reimburses me, I get my cash back and the expenses get properly recorded in my company. In other words, it puts the proper documentation in place.

A Simple System
This is such a simple system, but it works. The key is using it consistently. Now you can enjoy those business trips without the dread of dealing with the receipts afterwards.